CIR v CTA (2ND DIVISION) & PETRON CORPORATION

G.R. No. 207843

July 15, 2015
Perlas-Bernabe, J.

DOCTRINE: Sec. 4 of the Tax Code confers upon the CIR both: (a) the power to interpret tax
laws in the exercise of her quasi-legislative function; and (b) the power to decide tax cases in
the exercise of her quasi-judicial function.

Under the same provision, the power to interpret tax laws is subject to review by the Sec. of
Finance while the power to decide tax cases is subject to the exclusive appellate jurisdiction of
the CTA.

FACTS:
 Petron imports alkalyte as a raw material for the manufacture of gasoline.
 From Jan 2009 to Aug 2011 and on Apr 2012, Petron made 22 separate importations for
which the CIR issued Authorities to Release Imported Goods (ATRIGs), stating that Petron’s
importation of alkalyte is exempt from the payment of the excise tax because it was not
among those articles enumerated as subject to excise tax under the Tax Code.
 However, without prior notice, the CIR inserted a reservation for all ATRIG’s issued, stating
that Petron’s alkalyte importations from Sept 2011 to Jun 2012 (excluding Apr 2012)xxx
 Jun 2012: Petron imported 12.8M liters of alkalyte and paid VAT therefor.
o The importation was subjected to excise taxes of P4.35/liter or an aggregate amount
of P55.7M and an additional 12% VAT on the imposed excise tax in the amount of
P6.7M. (The imposition of the excise tax was premised on Customs Memorandum
Circular (CMC) No. 164-2012.)
 Petron filed a petition for review with the CTA, raising the issue of whether its importation
of alkalyte is subject to excise tax as contemplated under Sec. 148(e) of the Tax Code.
o CIR filed an MTD on the grounds of lack of jurisdiction and prematurity.
o The CTA granted the MTD. But upon Petron’s MR, the dismissal was reversed. The
CIR’s MR on the dismissal was denied. (In short, the CTA gave due course to Petron’s
appeal on the assessment.)
 The CTA found that:
o The issue in Petron’s appeal was not a question of the constitutionality or validity of
a law, bu a question on the propriety of the CIR’s interpretation of Sec. 148(e) of the
Tax Code which falls within the exclusive jurisdiction of the CTA under the phrase
“other matters arising under” Sec. 4 of the Tax Code.
o There are attending the circumstances that exempt the case from the rule on non-
exhaustion of administrative remedies.
 The CIR filed a petition for certiorari with the SC:
o The CTA committed grave abuse of discretion when it assumed authority to take
cognizance of the case despite its lack of jurisdiction to do so.
ISSUE: Did the CTA properly assumed jurisdiction over the appeal on the assessment on the
imposition of excise tax on Petron’s alkalyte imports based on Sec. 148(e) of the Tax Code?

HELD: NO! Sec. 4 of the Tax Code confers upon the CIR both: (a) the power to interpret tax laws
in the exercise of her quasi-legislative function; and (b) the power to decide tax cases in the
exercise of her quasi-judicial function.

Under the same provision, the power to intepret tax laws is subject to review by the Sec. of
Finance while the power to decide tax cases is subject to the exclusive appellate jurisdiction of
the CTA.

The CTA is a court of special jurisdiction, with power to review by appeal decisions involving tax
disputes rendered by either the CIR or the COC (Commissioner of Customs). Conversely, it has
no jurisdiction to determine the validity of a ruling issued by the CIR or the COC in the exercise
of their quasi-legislative powers to interpret tax laws.

In this case, Petron’s tax liability was premised on CMC No. 164-2012. The CTA has no
jurisdiction to take cognizance of the petition as its resolution would necessaritly involve a
declaration of the validity or constitutionality of the CIR’s interpreation of Sec. 148(e) of the Tax
Code, which is subject to the exclusive review of the Sec. of Finance and ultimately by the
regular courts.

The phrase “other matters arising under” the Tax Code should be understood as pertaining to
those matters directly related to the preceding phrase “disputed assessments, refunds of
internal revenue taxes, fees or other charges, penalties imposed in relation thereto” and must
therefore not be taken in isolation to invoke the jurisdiction of the CTA. (This is basically an
application of the statutory construction principle of ejusdem generis.)

Hence, as the CIR’s interpretation of a tax provision involves an exercise of her quasi-legislative
functions, the proper recourse against the subject tax ruling is a review by the Sec. of Finance
and ultimately the regular courts.

Further, under RA 1125, as amended by RA 9282, what is appealable to the CTA is a decision of
the COC over a customs collector’s adverse ruling on a taxpayer’s protest.

Here, Petron admitted to not having filed a protest of the assessment before the customs
collector and elevating a possible adverse ruling therein to the COC. There being no protest
ruling by the customs collector that was appealed to the COC, the filing of the petition before
the CTA was premature as there was nothing to yet to review.

Petition GRANTED. The petition for review filed by Petron before the CTA is DISMISSED for lack
of jurisdiction and prematurity.